101255595 Saskatchewan Ltd. v. Mara Riopel, 2023 SKKB 194

KING ’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 194 Date: 2023 09 19 Docket: QBG-RG-02978-2015 Judicial Centre: Regina BETWEEN: 101255595 Saskatchewan Ltd. and Mara Riopel PLAINTIFFS - and – 101093860 Saskatchewan Ltd., Darryl Bouvier, Toni Bouvier, Gene Howie, Crawford Realty

(1990) Ltd., Ajit Matharu Realty Prof. Corp., Ajit Matharu, McGinn Engineering Ltd. and Michael McGinn DEFENDANTS Counsel: E. Scott Hopley for the plaintiffs Deryk J. Kendall for the defendants, Crawford Realty

(1990) Ltd., Ajit Matharu Realty Prof. Corp., and Ajit Matharu Khurrum Awan and Erica Bodie for the defendants, McGinn Engineering Ltd. And Michael McGinn No one appearing for the defendant, 101093860 Saskatchewan Ltd. No one appearing for the defendant, Gene Howie No one appearing for the defendant, Darryl Bouvier No one appearing for the defendant, Toni Bouvier FIAT ROBERTSON J. September 19, 2023 INTRODUCTION [ 1 ] This decision addresses an application by the defendants McGinn Engineering Ltd. and Michael McGinn [McGinn] under The Queen’s Bench Rules , Rule 7-1 to decide a question of law which disposes of all or part of a claim and Rule 7-2 for

summary judgment dismissing the action as against those defendants. [ 2 ] The application contends that the claim as against those defendants is destined to fail because there was no

proximity as between those defendants and the plaintiffs to support a cause of action (negligence) and, in any event, any claim by the plaintiffs as third parties would be barred by the disclaimer appended to the engineering report. [ 3 ] For the reasons which follow, the application is granted. The claims against McGinn are dismissed because there is insufficient proximity between McGinn and those claiming against it to create a duty of care to those claimants and also because the disclaimer clause in the McGinn Report (as defined below) is properly applied to bar those claims.

BACKGROUND History of Action [ 4 ] The history of this action is summarized in my fiat of November 2, 2021 at paras. 3-20. I gave direction in that fiat on the timing for this application. I gave further directions in my fiats of September 12, 2022 and April 12, 2023. In my fiat of May 2, 2023, I stated that the application was ready for hearing and requested the Local Registrar

schedule a hearing. The application was heard on September 5, 2023. Materials relied upon for application [ 5 ] The following materials were filed and relied upon by the parties for the hearing of the application: • McGinn notice of application dated August 31, 2020; • Notice of application dated January 7, 2021 by Crawford RealtyLtd., Ajit Matharu Realty Prof.

Corp. and Ajit Matharu [Realtor]; • Affidavit of Michael McGinn sworn August 19, 2020 [McGinn Affidavit]; • Affidavit of Ajit Matharu sworn January 7, 2021 [Matharu Affidavit]; • Affidavit of Maria Riopel sworn December 1, 2021 [Riopel Affidavit]; • Affidavit of Russel James Renneberg sworn December 1, 2021 [Renneberg Affidavit]; • Affidavit of Milton C.

Walker sworn June 10, 2022 [Walker Affidavit]; • McGinn brief of law dated January 17, 2023; • Brief of law of plaintiff, 101255595 Saskatchewan Ltd. and Maria Riopel [595 Sask.] dated March 21, 2023; • Realtor brief of law dated March 23, 2023; and • McGinn reply brief of law dated May 1, 2023. Facts [ 6 ] The following facts can be taken as established from the filed materials. [ 7 ] 101093860 Saskatchewan Ltd. [860 Sask.] was the owner of a three-storey apartment building located at 2275 Lorne Street, Regina, Saskatchewan [Building]. The building was constructed in 1912 with additions in 1918 and 1929.

The apartment building had 22 suites when 860 Sask. was the owner (Riopel Affidavit, Exhibit “F” Lawrek Appraisal Report, page 5). [ 8 ] On July 22, 2010, the City of Regina [City], as local building authority, issued an order to 860 Sask. as owner of the Building because of concerns with the Building’s foundation [City Order].

The City Order required repairs to the Building and submission of an engineer’s report confirming structural adequacy of the Building prior to work commencing (Riopel Affidavit, Exhibit “G”). [ 9 ] On August 10, 2010, the City Order was registered against the title to the Building (Riopel Affidavit, Exhibit “H”). [ 10 ] 860 Sask. retained a professional engineer, George Labelle, to inspect the Building and provide an opinion and recommendations. Mr.

Labelle recommended monitoring of the foundation, which would involve placing measuring devices on the foundation to record any movement over time. (Riopel Affidavit, Exhibit “J”). [ 11 ] On December 6, 2010, 860 Sask. submitted the first report (2010) by George Labelle to the City. A second report (2011) was submitted to the City on April 6, 2012 [Labelle Reports] (Riopel Affidavit, Exhibit “J”). [ 12 ] 860 Sask. retained the Realtor as its agent.

Attempts to sell the Building were unsuccessful. [ 13 ] In September 2014, Ajit Matheru contacted McGinn on behalf of 860 Sask. for a quote on a structural assessment of the Building. The quote was approved and McGinn was retained to inspect the Building and provide a structural assessment (McGinn Affidavit, para. 4; Matharu Affidavit, paras. 5 and 8(b)). [ 14 ] McGinn was asked to provide the owner with advice regarding the general condition of the building and recommendations for maintenance.

McGinn was not told that its report would be used in marketing of the Building (McGinn Affidavit, para. 4; Exhibit “D” transcript of questioning of Ajit Matharu, pages T46-47 and T54-55 and Exhibit “E” transcript of questioning of

Gene Howie, pages T132 and T135-136). [ 15 ] McGinn asked Mr. Matharu for any relevant information regarding the Building. McGinn was not told about the previous City Order or Labelle Reports (McGinn Affidavit, paras. 5-6; Matharu Affidavit, paras. 7 and 8(

b) and Exhibit “A” transcript of questioning of Mr. McGinn, page T53). [ 16 ] On September 24, 2013, Michael McGinn conducted a visual inspection of the Building during a walk-through of the Building with Gene Howie, a principal of 860 Sask. Mr. Howie did not indicate any structural concerns with the building nor did he disclose the previous City Order or Labelle Reports (McGinn Affidavit, paras. 7-8). [ 17 ] McGinn completed a report dated September 24, 2013[McGinn Report] which was provided to 860 Sask. in care of Ajit Matharu.

The three page report concluded with the following “Summary Conclusions”: 4.1 The Assessment Report was prepared strictly as the basis of observations taken during the walk thru inspection. 4.2 The building frame appears to be structurally integral and in good condition.

The building maintenance program is good with recent replacement of the roof membrane, repointing of load bearing perimeter masonry brick wall construction; rebuild of metal fire escape systems on east and north building elevations; replacement of lower level concrete floors; replacement of vertical roof drain lines to pipe vents, all of which contribute to maintaining the structural integrity of the building. 4.3 In terms of building deficiency items, Owners should consider replacement of the exterior windows with properly fitted, thermopne PVC window systems.

There would be in Writer’s opinion moisture infiltration into the perimeter exterior wall cavities that would contribute to moisture degradation of the wall systems. 4.4 It is recommended that positive surface drainage away from basement level should be maintained to alleviate moisture infiltration through basement walls. (McGinn Affidavit, para. 9 and Exhibit “A”) [ 18 ] A disclaimer was appended to and formed part of the McGinn Report.

McGinn billed $866.25 for its work which was paid by 860 Sask. (McGinn Affidavit, paras. 9-10 and Exhibit “B”). [ 19 ] McGinn had no further involvement with any of the parties until the litigation commenced (McGinn Affidavit, para. 13). [ 20 ] Maria Riopel became interested in purchasing the Building (Riopel Affidavit, paras. 20 – 25). [ 21 ] The Realtor disclosed the existence of the McGinn Report to Maria Riopel, offering to provide a copy if an offer was made (McGinn Affidavit, Exhibit “C-1” Transcript of questioning of Maria Riopel at pages T23-24, T33 and T72-73; Exhibit “C-2” Transcript of questioning of Maria Riopel at pages T16-17; Riopel Affidavit at paras. 24 and 32). [ 22 ] On December 18, 2013, Maria Riopel, on behalf of the investors who later incorporated as 595 Sask., instructed Mr.

Matharu to prepare an offer for 595 Sask. to purchase the Building. On December 19, 2013, 595 Sask. entered into a dual agency agreement with the Realtor whereby the Realtor acted for both vendor and purchaser (860 Sask. and 595 Sask.) (Riopel Affidavit, paras. 20-27 and 32 and Exhibit “C”). [ 23 ] On December 19, 2013 at 1:35 p.m., the Realtor emailed a copy of the McGinn Report to Maria Riopel.

Maria Riopel read the McGinn Report, including the disclaimer clause (Riopel Affidavit, paragraphs 32-33 & 39). [ 24 ] No one contacted McGinn, including to ask permission to use the Report or to inquire about the Report (McGinn Affidavit, paras. 11-13 and Exhibit “C-3” Transcript of questioning of Maria Riopel at pages T48-50 and T67-69). [ 25 ] Ms.

Riopel, on behalf of the investors who incorporated as 595 Sask., took steps to check the state of the building prior to finalizing the sale, including an independent building inspection and appraisal, walk-though inspection and investigation of utility costs. (Riopel Affidavit, paras. 55-62). [ 26 ] 595 Sask. obtained its own building inspection report dated January 14, 2014. Ms. Riopel met with the building inspector and discussed his findings.

The building inspection report at unnumbered page 6 states “It is of brick construction – no significant movement noted on foundation or structure in general” (Riopel Affidavit, paras. 55-56 and Exhibit “E”). [ 27 ] In February 2014, Maria Riopel accompanied her appraiser and Gene Howie on a walk-through inspection of the Building. Ms. Riopel noticed uneven floors and cracks in the basement floor (Riopel Affidavit, paras. 46-51). [ 28 ] On February 19, 2014, the appraiser, Peter Lawrek, provided Maria Riopel with his appraisal report of the Building. The appraisal valued the Building at $1,885,000.

While noting at page 8 that “The author is not qualified to give engineering advice.”, the report stated at page 16 that “The subject building appears to be in good structural and mechanical condition for its age.” The report attached title to the Building at pages 66-67. The City Order registration is shown on the certificate of title (Riopel Affidavit, para. 58 and Exhibit “F”). [ 29 ] Ms.

Riopel retained the same law firm representing 860 Sask. to incorporate 595 Sask. and to close the sale (Riopel Affidavit, para. 62). [ 30 ] The law firm had represented 860 Sask. in 2010 in dealing with the City about the City Order (Riopel Affidavit, Exhibit “G” letters from KMP Law to the City Bylaw Enforcement Branch).

[ 31 ] The Realtor provided a copy of the title to the Building to Ms. Riopel before purchase of the Building. The title showed the registration of the City Order. Ms. Riopel did not ask about it, assuming her lawyer would review the title (Riopel Affidavit, para. 66). [ 32 ] On April 4, 2014 the deal closed and an April 21, 2014, 595 Sask. took possession of the Building. The sale price was $1,770,000 (Riopel Affidavit, para. 63). [ 33 ] On April 10, 2014, the McGinn Report was provided to the City.

On April 15, 2014, the law firm handling the sale for both vendor and purchaser wrote the City referencing the McGinn Report in support of its request to discharge the City Order. The City complied and the City Order was discharged from title on April 21, 2014 (Riopel Affidavit, para. 72; Exhibit “G” “File Discontinued” and ISC “Interest Discharge Notice” and Exhibit “I” letter from KMP Law). [ 34 ] After acquiring the Building, 595 Sask. began work to upgrade the Building.

In July 2015, a contractor told 595 Sask. that the contractor could not provide a quote for floor replacement because there was something wrong with the foundation and the walls were moving (Riopel Affidavit, para. 81). [ 35 ] 595 Sask. retained BBK Engineering to assess the structure of the Building. BBK reported that there was a risk of “catastrophic failure” of the structure [BBK Report] (Riopel Affidavit, para. 84 – 86 and Exhibit “L” pages 3-4). [ 36 ] In 2015, the owner retained Russel Renneberg, a building engineer, to provide another opinion. Mr.

Renneberg recommended stabilization and repairs to the foundation of the Building (Riopel Affidavit, paras. 87-91; Renneberg Affidavit, Exhibit “C”). [ 37 ] On April 3, 2018, Mr.

Renneberg produced a report to 595 Sask. stating his opinion that McGinn had failed to meet the requisite standard of care expected of a professional engineer with respect to the 2014 McGinn Report [Renneberg Report] (Renneberg Affidavit, Exhibit “C”). [ 38 ] On October 30, 2018, Maria Riopel made a complaint to the Association of Professional Engineers and Geologists [APEGS] against McGinn with respect to the McGinn Report (Riopel Affidavit, para. 94 and Exhibit “P”). [ 39 ] On March 20, 2020, the APEGS Investigation Committee dismissed the complaint [APEGS Decision] (McGinn Affidavit, paras. 17-18 and Exhibits “F” and “G”).

ISSUES [ 40 ] The issues are: 1. Is the matter suitable for

summary judgment? 2. If so, is the claim as against these defendants destined to fail? POSITION OF PARTIES McGinn [ 41 ] The position of McGinn is that the application is suitable for

summary judgment. The tort claim by the owner against McGinn is destined to fail because of a lack of proximity to support a duty of care, which is a required element for negligence. Additionally, the disclaimer in the McGinn Report shields McGinn from liability as against 595 Sask. and the Realtor as third parties. The questions to be determined are essentially questions of law. The facts necessary to decide these questions are established by the filed materials and not seriously disputed. 595 Sask. [ 42 ] The position of 595 Sask. is that the liability issue is not suitable for

summary judgment. A trial is required because material facts are in dispute, in particular whether McGinn was professionally negligent in failing to observe and report on foundational problems with the Building, whether McGinn was negligent in failing to contact the City building authority, and whether the negligence was ordinary or gross negligence. This is a dangerous building case, which extends liability to third parties who are harmed by the dangerous condition. In these circumstances, any disclaimer clause is void as contrary to public policy. Any doubt over these questions must be resolved at trial.

Realtor [ 43 ] The position of the Realtor is that the matter should proceed to trial. If the claim against McGinn is dismissed, the Realtor’s defence will be prejudiced, because McGinn is in the best position to defend against the claim of professional negligence with respect to the McGinn Report. The Realtor will be left alone as the only viable defendant. ANALYSIS [ 44 ] I will first address the issue of whether the issues to be determined are suitable for

summary judgment and then address the question of whether McGinn can be liable. That question involves two legal issues: whether there was sufficient proximity between the parties to create a duty of care on the part of McGinn to 595 Sask.; and whether the disclaimer clause is properly applied to bar the claim. Suitable for

Summary Judgment?

[ 45 ] I must first decide whether the action is suitable for

summary judgment before deciding whether to dismiss the claim as against McGinn and grant judgment. [ 46 ] The Supreme Court of Canada, in Hryniak v Mauldin , 2014 SCC 7 at para 5 , [2014] 1 SCR 87 [ Hryniak ] , endorsed the

summary judgment procedure, recognizing that it promotes “fair access to the affordable, timely and just adjudication of claims.” As Karakatsanis J. wrote in Hryniak at para 4 : [4] … In my view, a trial is not required if a

summary judgment motion can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial. [ 47 ]

Part 7 of The Queen’s Bench Rules provides procedures for resolving claims without a full trial. Division 2 of

Part 7 provides for

summary judgment. This alternative procedure is consistent with the foundational rules, the purpose of which is stated in Rule 1-3(1) as intending “to provide a means by which claims can be justly resolved in or by a court process in a timely and cost effective way.” [ 48 ] Rule 7-5(1) of The Queen’s Bench Rules requires the court to be “satisfied that there is no genuine issue requiring a trial with respect to a claim or defence” or “the parties agree to have all or part of the claim determined by

summary judgment and the Court is satisfied that it is appropriate to grant

summary judgment.” [ 49 ] Disputes which require factual determinations may not be suitable for

summary judgment, which usually rely upon agreed facts and affidavit evidence.

Summary judgment is unsuitable where credibility assessments are required to determine who to believe and what actually happened. [ 50 ] However, Rule 7-5(2) allows the court, “in determining … whether there is a genuine issue requiring trial” some discretion in: 7-5(2) … (b) (

i) weighing the evidence; (ii) evaluating the credibility of a deponent; [and] (iii) drawing any reasonable inference from the evidence. [ 51 ] The materials filed provide the necessary factual foundation for determination of what are essentially questions of law relating to the requisite proximity to establish a tort claim and the effect of the disclaimer clause. I am satisfied that there is no genuine issue with respect to McGinn’s liability that requires a trial.

Claim destined to fail? [ 52 ] The first question is whether there was sufficient proximity between McGinn and 595 Sask. to support a duty of care owed by McGinn to 595 Sask.? If not, then even if McGinn was negligent in preparing the McGinn Report, the negligence claim of 595 Sask. could not succeed and the claim would inevitably be dismissed. Elements of negligence [ 53 ] Negligence is a tort or civil wrong. Negligence is defined as failure to use reasonable care resulting in damage or injury to another. To succeed in a claim based upon negligence, the plaintiff/claimant must establish four elements: (

a) Duty of care - a legal duty owed by the defendant to the plaintiff; (

b) Breach of the duty of care – act or omission falling below the required standard of care; (

c) Proximate cause – breach cause of harm to plaintiff; and (

d) Harm – damages or injury suffered by the plaintiff. [ 54 ] Put in sentence form, to establish a claim based upon negligence, the plaintiff must prove that: the defendant owed a duty of care to the plaintiff; the defendant breached that duty of care; and the breach was the proximate cause of damage or injury to the plaintiff, which is compensable in damages. [ 55 ] The claim of 595 Sask. is that McGinn was negligent in failing to detect and report on foundation problems with the Building in the McGinn Report on which 595 Sask. reasonably relied in deciding whether to purchase the Building. [ 56 ] McGinn denies it was negligent, but argues that question is irrelevant, since McGinn owed no duty of care to 595 Sask. to support a claim in negligence.

There could be no duty of care both because of a lack of proximity and because of the application of the disclaimer clause. These defences will be examined in turn. Proximity [ 57 ] Legal duties and claims are usually based upon the relationship between persons. In contract law, this is known as privity and applies to the contracting parties. In tort law, it is known as proximity and must exist between the plaintiff and defendant.

Both are founded upon a close and direct relationship which creates duties owed by one to the other. [58] Proximity in tort law means that the parties must be sufficiently close so that it is reasonably foreseeable thatone party’s negligence would cause loss or damage to the other.

While related, proximity and foreseeability are distinct concepts.Proximity is about whether the relationship between the parties is sufficiently close to justify a duty of care. [59] I pause here to accept that it is foreseeable that a third party might obtain and rely upon a professional’s reportabout a property which was commissioned by and intended for the client only. In this case, the claim involves an engineering report, butother cases have involved an appraisal, building inspection or environmental assessment report.

The class of potential third parties isindeterminate, but might include potential purchasers or mortgage lenders. The foreseeability of such use is recognized in the commoninclusion of disclaimer clauses in such reports. The point is that such foreseeability does not, on its own, create liability to a third party.There must be more, in particular proximity to create a duty of care. [60] The modern approach to establishing a duty of care was stated in Anns v Merton London Borough Council,[1978] AC 728 (HL) [Anns]. The Supreme Court of Canada adopted this principle in Kamloops v Nielsen, (SCC), [1984]2 SCR 2.

The Supreme Court reaffirmed the principle in Cooper v Hobart, 2001 SCC 79, [2001] 3 SCR 537 [Cooper], stating at para.22: 22 In Donoghue v. Stevenson [ (FOREP), [1932] AC 562 (HL)] the House of Lords revolutionized the common law byreplacing the old categories of tort recovery with a single comprehensive principle – the negligence principle. Henceforward, liabilitywould lie for negligence in circumstances where a reasonable person would have viewed the harm as foreseeable.

However,foreseeability alone was not enough; there must also be a close and direct relationship of proximity or neighbourhood. [61] In Cooper, the Supreme Court of Canada upheld dismissal of a claim by investors against a statutory regulatorwhich had suspended a mortgage broker’s licence on the basis that the regulator had no duty of care to the investors. In doing so, thecourt discussed the concept of proximity and policy considerations which support or negate a duty of care. 31 On the first branch of the Anns test, reasonable foreseeability of the harm must be supplemented by proximity.

The question is whatis meant by proximity. Two things may be said. The first is that “proximity” is generally used in the authorities to characterize the typeof relationship in which a duty of care may arise. The second is that sufficiently proximate relationships are identified through the use ofcategories. The categories are not closed and new categories of negligence may be introduced. But generally, proximity is established byreference to these categories.

This provides certainty to the law of negligence, while still permitting it to evolve to meet the needs of newcircumstances. 32 On the first point, it seems clear that the word “proximity” in connection with negligence has from the outset and throughout itshistory been used to describe the type of relationship in which a duty of care to guard against foreseeable negligence may be imposed.“Proximity” is the term used to describe the “close and direct” relationship that Lord Atkin described as necessary to grounding a duty ofcare in Donoghue v.

Stevenson [ (FOREP), [1932] AC 562 (HL)], supra, at pp. 580-81: Who then, in law is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I oughtreasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called inquestion. . . .

I think that this sufficiently states the truth if proximity be not confined to mere physical proximity, but be used, as I think it wasintended, to extend to such close and direct relations that the act complained of directly affects a person whom the person alleged to bebound to take care would know would be directly affected by his careless act. [Emphasis added.] 33 As this Court stated in Hercules Managements Ltd. v.

Ernst & Young, (SCC), [1997] 2 S.C.R. 165, at para. 24, perLa Forest J.: The label “proximity”, as it was used by Lord Wilberforce in Anns, supra, was clearly intended to connote that the circumstances of therelationship inhering between the plaintiff and the defendant are of such a nature that the defendant may be said to be under an obligationto be mindful of the plaintiff’s legitimate interests in conducting his or her affairs. [Emphasis added.] 34 Defining the relationship may involve looking at expectations, representations, reliance, and the property or other interests involved.

Essentially, these are factors that allow us to evaluate the closeness of the relationship between the plaintiff and the defendant and todetermine whether it is just and fair having regard to that relationship to impose a duty of care in law upon the defendant. . . . 37 This brings us to the second stage of the Anns test. As the majority of this Court held in Norsk [Canadian National Railway Co. vNorsk Pacific Steamship Co., (SCC), [1992] 1 SCR 1021], at p. 1155, residual policy considerations fall to beconsidered here.

These are not concerned with the relationship between the parties, but with the effect of recognizing a duty of care onother legal obligations, the legal system and society more generally. Does the law already provide a remedy? Would recognition of theduty of care create the spectre of unlimited liability to an unlimited class? Are there other reasons of broad policy that suggest that theduty of care should not be recognized?

Following this approach, this Court declined to find liability in Hercules Managements [HerculesManagements Ltd. v Ernst & Young, (SCC), [1997] 2 SCR 165], supra, on the ground that to recognize a duty of carewould raise the spectre of liability to an indeterminate class of people. [Emphasis in original] [62] In 1688782 Ontario Inc. v Maple Leaf Foods Inc., 2020 SCC 35, 450 DLR (4th) 181, the Supreme Court ofCanada reaffirmed the requirement of proximity, stating at para. 31:

[31] A party may seek “to base a finding of proximity upon a previously established or analogous category” (Livent [Deloitte & Touchev Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 SCR 855], at para. 28).

But where no established proximate relationship can beidentified, courts must undertake a full proximity analysis in order to determine whether the close and direct relationship ⸺ which thisCourt has repeatedly affirmed to be the hallmark of the common law duty of care ⸺ exists in the circumstances of the case (ibid., atpara. 29; Saadati [Saadati v Moorhead, 2017 SCC 28, [2017] 1 SCR 543], at para. 24; Cooper, at para. 32). [Emphasis in original] [63] More recently, in Revelstoke (City) v Gelowitz, 2023 BCCA 139 at paras 38-39, 482 DLR (4th) 583, the BritishColumbia Court of Appeal summarized the Anns/Cooper analysis: Anns/Cooper analysis [38] In Marchi [Nelson (City) v Marchi, 2021 SCC 41], Justices Karakatsanis and Martin, for the Court, succinctly summarized the two-stage Anns/Cooper framework that applies in novel duty of care cases: [17] … Under the first stage, the court asks whether a prima facie duty of care exists between the parties.

The question at this stage iswhether the harm was a reasonably foreseeable consequence of the defendant’s conduct, and whether there is “a relationship ofproximity in which the failure to take reasonable care might foreseeably cause loss or harm to the plaintiff” (Rankin’s Garage [Rankin’sGarage & Sales) v J.J., 2018 SCC 19, [2018] 1 SCR 587], at para. 18).

Proximity arises in those relationships where the parties are insuch a “close and direct” relationship that it would be “just and fair having regard to that relationship to impose a duty of care in law uponthe defendant” (Cooper, at paras. 32 and 34). [18] If there is sufficient proximity to ground a prima facie duty of care, it is necessary to proceed to the second stage of theAnns/Cooper test, which asks whether there are residual policy concerns outside the parties’ relationship that should negate the primafacie duty of care (Cooper, at para. 30).

As stated in Cooper, at para. 37, the residual policy stage of the Anns/Cooper test raisesquestions relating to “the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally”,such as: Does the law already provide a remedy? Would recognition of the duty of care create the spectre of unlimited liability to an unlimitedclass?

Are there other reasons of broad policy that suggest that the duty of care should not be recognized? [39] A “close and direct” relationship may involve physical proximity but it is more broadly concerned with whether the actions of adefendant have a close or direct effect on a plaintiff such that the defendant ought to have had the plaintiff in mind as a person potentiallyharmed: Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41 at para. 29. [64] McGinn argues that on the facts of this case, there was insufficient proximity between McGinn and 595 Sask. toestablish any duty of care.

McGinn had no contact with or knowledge of 595 Sask. when preparing the McGinn Report. There was no“close and direct relationship”, therefore, there was no proximity. [65] I agree. The McGinn Report was commissioned by and paid by 860 Sask. for its own purposes. McGinn had nocontact with 595 Sask. or any of its principals. McGinn was not told at the time or later about the use of the McGinn Report in theproposed sale of the Building or about the sharing of the McGinn Report. Nor was McGinn contacted by or consulted about its use byothers.

The sharing of the McGinn Report did not expand the boundary of proximity to these strangers. There was simply no close anddirect relationship with 595 Sask. Nor was there any undertaking by McGinn to any third party on which their detrimental reliance, ifestablished, could found a tort claim. [66] To find proximity in the circumstances of this case would make professionals who provide opinions on realproperty, such as building engineers, appraisers and building inspectors, unwilling (and unpaid) insurers for an indeterminate class ofunknown third parties.

That would stifle commerce and increase costs of professional services, contrary to the public interest. [67] I conclude there is insufficient proximity between McGinn and 595 Sask. to support a duty of care. That beingthe case, whether McGinn was negligent in the production of the McGinn Report is irrelevant. McGinn’s only duty of care was to 860Sask. Dangerous Building Claim [68] 595 Sask. argued that this is a dangerous building case, as recognized in Winnipeg Condominium CorporationNo. 36 v Bird Construction Co., (SCC), [1995] 1 SCR 85. As such, it is appropriate to extend the duty of care to thirdparties.

I disagree that this claim falls within that category of cases. Those cases involved claims against builders who created thedangerous condition. The court found it would be unfair to bar claims by innocent purchasers of the building. [69] The facts of this case are distinguishable from the dangerous building category of cases. McGinn did nothing tocreate or cause any dangerous condition in the Building. Any defects in this century-old building already existed. The claim ofnegligence is that McGinn failed to detect and report alleged defects.

That omission is distinct from the dangerous building category ofclaims which involve active negligence. Disclaimer clause [70] McGinn also relied upon the disclaimer clause to bar relief by any third party which relied upon the McGinnReport. Such clauses have been applied to bar claims by third parties in similar circumstances. [71] The Supreme Court of Canada in Edgeworth Construction Ltd. v N.D. Lea & Associates Ltd., (SCC), [1993] 3 SCR 206 [Edgeworth] held that an express disclaimer of liability can be an effective bar against a claim by a third party

who relied on work in the knowledge of the disclaimer. Permitting third parties to rely on reports which are expressly protected by adisclaimer would undermine the ability of contracting commercial parties to govern their own affairs. [72] In Wolverine Tube (Canada) Inc. v Noranda Metal Industries Ltd. (1995), (ON CA), 26 OR(3d) 577 (Ont CA), the Ontario Court of Appeal cited Edgeworth in rejecting a claim of liability where a third party relied upon anenvironmental report prepared for the property owner. The report disclaimed responsibility to third parties using and relying on thereport.

Finlayson J.A. wrote for the court at pages 580-581: Analysis As there is no privity of contract between A.D.L. and Wolverine, if A.D.L. is to be held liable to Wolverine for negligent statements inits reports, A.D.L. must be found to have owed a duty of care to Wolverine. Such a proposition accords with the leading case on liabilityfor negligent statements, Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575, [1964] A.C. 465 (H.L.).

This decisionmakes clear that a duty of care will not arise where the defendant disclaims responsibility for the effects of relying on its statements: seeHedley Byrne, supra, at pp. 595 and 613 All E.R.; see also Carman Construction Ltd. v. Canadian Pacific Railway Co.,(SCC), [1982] 1 S.C.R. 958 at pp. 970-72, 136 D.L.R. (3d) 193. The same conclusion is reached by McLachlin J., writing for six of the seven members of the court, in Edgeworth Construction Ltd. v.N.D. Lea & Associates Ltd., (SCC), [1993] 3 S.C.R. 206, 107 D.L.R. (4th) 169. … . . .

Three aspects of the case under appeal combine to support the motion judge's finding that A.D.L. did not owe a duty of care toWolverine. First, the reports contained a disclaimer of liability by A.D.L. to third parties for any damages they might suffer as a result ofdecisions or actions based on the reports. Such a disclaimer appeared on each of the three reports and preceded any portion of the text ofthe reports. The affidavit evidence and cross-examination thereon indicated that Wolverine officials read the disclaimer and obtainedlegal advice on its meaning.

In addition to the disclaimer of responsibility to third parties, Noranda was under a contractual obligation notto use the A.D.L. reports outside of its own organization without A.D.L.'s written permission. And finally, the reports were inWolverine's hands only because Noranda, without A.D.L.'s knowledge or consent, acted in breach of its contract with A.D.L. The language of the disclaimer clause in the reports is broad enough to prevent the assumption of a duty of care to Wolverine andaccordingly to preclude substantiating a claim in negligence by Wolverine against A.D.L.

The disclaimer in itself would be sufficient todispose of the case. However, when the language of the disclaimer is combined with the fact that Noranda acted in breach of its contractwith A.D.L. in giving the reports to Wolverine without A.D.L.'s knowledge or permission, additional justification is given to the findingthat a duty of care did not arise on the facts of this case. [73] In Royal Bank of Canada v Burgoyne, 1996 NSCA 135, 152 NSR (2d) 150, the Nova Scotia Court of Appealrejected a claim of liability by the Bank which relied upon an appraisal report provided by the borrower.

The appraisal report expresslydisclaimed any reliance by third parties at para. 33: It was open to the Bank to contact the appraiser for permission to use the report, or, alternatively, to require that the client provide anunqualified report. In choosing to do neither, the Bank assumed the risk that the report was not worthy of reliance. It cannot now turn tothe appraiser for recovery. Applying the Cognos [Queen v Cognos Inc. (1993), (SCC), 14 CCLT (2d) 113] test, theBank's reliance on the report was unreasonable.

Using the Hedley Byrne [[1964] AC 465] (HL)] analysis, the duty of care does not arise,the appraiser not having assumed the risk. The Bank's claim against the appraiser must fail. [74] In Kokanee Mortgage M.I.C. Ltd. v Burrell, 2018 BCCA 151, 422 DLR (4th) 83, the British Columbia Court ofAppeal held that a disclaimer clause barred liability by the mortgage lender against an appraiser which had provided an appraisal reportto the borrower.

The court found that the lender’s reliance on the appraisal report was unreasonable in the face of the disclaimer clause. [40] Finally, Kokanee argued on appeal that the disclaimer clause is ambiguous and does not clearly succeed in limiting liability. Theargument was based on a lack of clarity or even inconsistency between particular sentences within the primary clause. I cannot accede tothat argument. It is plain that, when read as a whole, the disclaimer is clear and unambiguous. Mr. Carson relied on the appraisal despitea clear disclaimer that if he did so, Coast Appraisal could not be liable to Kokanee.

The fact that the appraisal was intended to be used forfirst or second mortgage financing does not render his reliance reasonable in the circumstances.

The client was entitled to take theappraisal to a mortgage financial institution and use it to interest a lender in doing business with him, not to provide the lender with anopinion on which it could rely in deciding to make the loan, without seeking consent. [75] In Community Mental Health Initiative Inc. v Summit Lounge Ltd., 2018 NLCA 42, the Newfoundland andLabrador Court of Appeal cited Edgeworth in upholding dismissal of a claim by a third party based upon reliance of an environmentalassessment report which contained a disclaimer clause, stating at para. 30: “The disclaimers fully preclude any claim by CMHI againstStantec.” [76] From these and other decisions, I conclude that an express disclaimer clause can be an effective bar against aclaim by a third party who relied upon the report with knowledge of the disclaimer.

I see no good reason why it should not be similarlyapplied in this case. [77] 595 Sask. argued the disclaimer clause should not be applied because it was not discussed between thecontracting parties at the time the McGinn Report was commissioned. Leaving aside the fact that 595 Sask. is a stranger to that contract,the disclaimer clause was part of the McGinn Report reviewed by Maria Riopel. And there is no evidence that 860 Sask. challenged theinclusion of the disclaimer clause.

On the contrary, the McGinn Report was accepted and McGinn’s bill was paid. [78] The McGinn Report was prepared for 860 Sask., not anyone else. McGinn was not told that the McGinn Reportwould be used for marketing or sale of the Building. Even if McGinn could foresee that a third party might obtain the McGinn Report

and rely upon its content, McGinn protected itself through the disclaimer clause. [ 79 ] The disclaimer is written on a single page which immediately follows the three pages of text of the McGinn Report. The disclaimer clause is clear and unambiguous. It states that the report was prepared for the client on the basis of information known at the time. It states that any reliance by third parties is done at their own risk and that McGinn accepts no responsibility for such use.

Such clauses are standard. [ 80 ] The first and last paragraphs of the disclaimer clause are reproduced below: This report was prepared by McGinn Engineering Ltd. for the above referenced project. The material in it reflects McGinn Engineering Ltd.’s judgment in light of the information available to it at the time of preparation. Any use which a Third Party makes of this report or any reliance or decisions to be made based on it are the responsibility of such Third Party.

McGinn Engineering Ltd. accepts no responsibility for damages, if any, suffered by any Third Party as a result of decisions made or actions based on this report. . . . Third Parties wishing to rely upon this report do so entirely at their own risk, upon the express understanding that this report has not been prepared for their use and that McGinn Engineering Ltd. will not be liable in any manner, including liability in Contract and in Tort, for any damages whatsoever resulting from such use.

This Disclaimer Clause is to be attached to and form part of the structural engineering inspection report. (McGinn Affidavit, Exhibit “A”, unnumbered page 4) [ 81 ] The disclaimer page was part of the McGinn Report. Maria Riopel admitted reading the disclaimer. [ 82 ] Was it reasonable in these circumstances for 595 Sask. to rely upon the McGinn Report?

No. 595 Sask. knew of the disclaimer clause. 595 Sask. had no contact with McGinn nor was 595 Sask. involved with 860 Sask. in commissioning the McGinn Report. 595 Sask. paid nothing for the McGinn Report. [ 83 ] 595 Sask. was concerned about any foundation issues because of the “obvious” potential for problems with a century-old building. It commissioned its own building inspection and appraisal reports. Maria Riopel personally inspected the Building.

None of those steps detected the problem later said to have existed. [ 84 ] For 595 Sask. to later claim it would not have purchased the Building but for the McGinn Report is difficult to accept. But even if true, then 595 Sask. relied upon that report at its own risk. In these circumstances, the disclaimer clause in the McGinn Report is properly applied to bar the claim of 595 Sask. as against McGinn. Unconscionability [ 85 ] 595 Sask. argued the disclaimer clause should be voided as unconscionable.

I do not find it to be unconscionable in its terms or application to this case. [ 86 ] McGinn billed and was paid $866.25 by 860 Sask. for its work.

In Gordon v Krieg , 2013 BCSC 842 at paras 165-167 , 33 RPR (5th) 282 , the court accepted that the cost of the report versus the liability exposure is a relevant factor in determining whether an exclusion of liability clause should be voided as unconscionable. [ 87 ] In the circumstances of this case, including the factors considered above, the disclaimer clause should be applied to bar any claim by 595 Sask. or any other third party seeking to base their claim on the McGinn Report. The disclaimer clause is reasonable and should be applied to bar third party claims, such as that of 595 Sask.

There is no unfairness in doing so. Other observations [ 88 ] While not necessary to my conclusion or relied upon for my decision, I note the following facts which might also support dismissal of the claim should it proceed to trial. [ 89 ] The basis of the claim is that but for the failure of McGinn to detect and report on the structural problems, 595 Sask. would have acted differently in deciding to purchase the Building. But this assumes that McGinn was the only source of that information and that it was reasonable for 595 Sask. to rely upon the McGinn Report.

Neither proposition stands up under scrutiny. [ 90 ] I pause to acknowledge that the corporation 595 Sask. did not exist when the McGinn Report was produced. That fact would likely impede the claim by the corporate plaintiff. Strictly speaking, 595 Sask. cannot have relied upon the McGinn Report in the decision to purchase the Building because 595 Sask. was only created at the time of transfer to provide corporate ownership.

But references to “595 Sask.” in this decision include Maria Riopel in her personal capacity as an investor in and principal of the corporation 595 Sask. [ 91 ] First, the City Order should have been known to 595 Sask. It was registered against title. The title was attached to the appraisal report and would have been reviewed by the lawyer acting for 595 Sask. That law firm acted for both 595 Sask. and 860 Sask., so would also be aware of the City Order from its prior representation of 860 Sask. So 595 Sask., should have known of the City Order before the sale was finalized.

It cannot plead ignorance. [ 92 ] Second, 595 Sask. was concerned with the foundation. As Mr. Matharu said in response to Ms. Riopel’s inquiry, that was an obvious concern given that the Building was over one hundred years old. Ms. Riopel personally observed uneven floors and basement cracks when she inspected the building.

[ 93 ] Third, although 595 Sask. did not obtain its own engineering report, it did obtain both an appraisal report and building inspection report. Neither identified structural concerns beyond what would be expected in such an old building. If the foundation issues were so obvious, why were they not detected by the appraiser or building inspector? A possible inference is that they were not so obvious. [ 94 ] Fourth, the McGinn Report was provided to 595 Sask. the day after Maria Riopel instructed the Realtor to prepare an offer to purchase.

So while the McGinn Report may have given comfort to 595 Sask., it was not reviewed prior to the decision to make an offer. If so, then it could not have been reasonably relied upon in deciding to make the offer. [ 95 ] Fifth, the allegation and evidence of professional negligence is controversial. The City building inspector identified concerns with the Building’s foundation in 2010 from a visual inspection. The 2011 Labelle Reports recommended monitoring. The 2014 appraisal report by Peter Lawrek and 2014 building inspection reports did not find any special concerns.

The 2015 BBK Report found structural problems, warning of possible “catastrophic failure”. While the 2018 Renneberg Report is critical of McGinn, the Walker Affidavit contends that the Renneberg Report is overstated and biased. The 2020 APEGS Decision dismissed Ms. Riopel’s complaint against McGinn. The APEGS Investigation Committee included 11 professional engineers, so carries weight.

Conclusion [ 96 ] I conclude that the claim of 595 Sask. against McGinn cannot succeed both because of a lack of proximity on which to establish a duty of care and because the disclaimer clause would properly be applied to bar the claim. The claim of 595 Sask. against McGinn is therefore destined to fail and must be dismissed. Costs [ 97 ] McGinn as successful party would normally be entitled to an award of costs. However, none of the parties addressed costs either in their written or oral submissions. If costs remain in issue, then counsel are invited to contact the Local Registrar to arrange to speak to costs.

J. D.N. ROBERTSON